APPELLATE TRIBUNAL INLAND REVENUE, BENCH-I, ISLAMABAD
ITA No.1271/IB/2018
& MA (AG)
No.06/IB/2021
(Tax Year 2014)
******
|
M/s
Prime Castle Marriage Hall, Lahore Road, Sargodha |
|
Appellant |
|
|
Vs |
|
|
The
Commissioner Inland Revenue (Withholding Tax), RTO, Sargodha. |
|
Respondent |
|
|
|
|
|
Appellant
by |
|
Ch. Naeem Ul Haq, Advocate |
|
Respondent
by |
|
Mr. Zaheer Qureshi, DR |
|
|
|
|
|
Date
of hearing |
|
25.02.2021 |
|
Date
of order |
|
25.02.2021 |
O R D E R
2. Brief facts of the
case are that the appellant taxpayer derives income by
running a marriage hall. Section 236D of the Income Tax Ordinance, 2001 (“the
Ordinance”) was introduced vide Finance Act, 2013 and implemented with
effect from 01.07.2013 and the taxpayer became a prescribed person for
collection and deduction of withholding tax from any person arranging or
holding a function (as defined in the said section) in his marriage hall. Being
prescribed person under section 236D of the Ordinance, the taxpayer was under a
legal obligation to collect and deposit advance tax @ 10% on the total amount
of bills collected from persons arranging or holding functions in the marriage
hall during the period under consideration but he failed to do so. Therefore, the
assessment order in the case for the tax year, 2014 (July 2013 to June 2014)
was finalized under section 161 of the Ordinance creating a demand of
Rs.2,592,390/- for default of non-collection/non-payment of tax under section
236D of the Ordinance. The taxpayer being aggrieved preferred appeal before the
learned CIR(A), RTO, Sargodha who vide order No.103 dated 26.02.2015 dismissed
the appeal of the taxpayer being barred by time limitation. Thereafter the
taxpayer preferred appeal before the Appellate Tribunal Inland Revenue,
Islamabad who vide order dated 09.06.2017 remanded the case back with the
directions that the case be decided afresh after affording a proper opportunity
of hearing to the taxpayer in accordance with law. In the light of the
directions contained in the order of the ATIR, a notice was issued and served
upon the Mr. Iftikhar Manager of taxpayer wherein the taxpayer was requested to
attend the proceedings and explain his position along with documentary evidence
on the due date fixed 21.12.2017. On the said date, nobody attended the office
nor any application for adjournment was received in the office. Again a
reminder notice was issued for compliance by 09.01.2018. In response, the AR
submitted a written reply. It appeared to form the reply of the AR that the
taxpayer had nothing to explain in his favour. The default of
non-collection/non-payment of tax as provided under section 236D of the
Ordinance had been established. The reply of the learned AR was entirely based
on afterthought and he failed to explain his position along with documentary
evidence. The taxpayer was, therefore, treated u/s 161 of the Ordinance as a taxpayer
in default and held personally liable to deposit tax worked out as under:
|
Tax
for the dates confronted vide SCN No.631 dated 10.02.2014 |
776,390/- |
|
Tax
for the dates confronted vide SCN No.631 dated 10.02.2014 |
329,600/- |
|
Tax
for the dates confronted vide SCN No.631 dated 10.02.2014 |
130,000/- |
|
Tax
for the dates confronted vide SCN No.631 dated 10.02.2014 |
847,750/- |
|
Tax
for the month of April 2014 |
306,200/- |
|
Tax
for the month of April 2014 |
154,250/- |
|
Tax
for the month of April 2014 |
48,200/- |
|
Total
tax |
2,592,390/- |
|
Already paid
vide CPR No.IT-20141231-0397-1225849 dated 31.12.2014 |
400,000/- |
|
Balance
tax payable |
2,192,390/- |
The
taxpayer being aggrieved filed an appeal before the learned CIR (A) who
dismissed the appeal of the taxpayer vide order No.1004 dated 03.04.2018. Still
feeling aggrieved, the appellant has now come up before this Tribunal and has
assailed the impugned order on a number of grounds.
3. This case came up for hearing on
25.02.2021. Learned AR reiterated the
contentions already submitted in the grounds of appeal as set forth in the memo
of appeal. Learned DR opposed the appeal on the ground
that learned Commissioner (Appeals) has passed a speaking order and there is no
illegality or lacuna in his order.
4. We have heard both the parties and
perused the record. The controversy involved in the instant appeal relates to
the provision of section 236D of the Ordinance. This section was inserted
through Finance Act, 2013 which reads as under:-
“236D.
Advance tax on functions and gatherings: -
(1) Every prescribed person shall collect advance tax at the rate specified in
Division XI of Part IV of the First Schedule on the total amount of the bill
from a person arranging or holding a function in a marriage hall, marquee,
hotel, restaurant, commercial lawn, club, a community place or any other place
used for such purpose.
(2) Where the food, service, or any other
facility is provided by any other person, the prescribed person shall also
collect advance tax on the payment for such food, service, or facility at the
rate specified in Division XI of Part IV of the First Schedule from the person
arranging or holding the function.
(3) The advance tax collected under sub-section
(1) and sub-section (2) shall be adjustable.
(4) In this section: -
(a) "function" includes any wedding-related
event, a seminar, a workshop, a session, an exhibition, a concert, a show, a
party, or any other gathering held for such purpose; and
(b) "prescribed person" includes the
owner, a lease-holder, an operator or a manager of a marriage hall, marquee,
hotel, restaurant, commercial lawn, club, a community place or any other place
used for such purpose.”
The bare reading of
the above provisions of law clearly suggests that the advance tax at the rate
of ten percent (at the relevant time) will be collected on the total amount of
the bill from a person arranging or holding a function in a marriage hall,
marquee, hotel, restaurant, commercial lawn, club, a community place or any
other place used for such purpose. The advance tax will be collected by the
owner, lease-holder, operator, or manager of the venue where the event is being
held. An advance ten percent tax will also be collected from the person
arranging the function on the food, service, or other facility provided by a
person or company other than the owner, lease-holder, operator, or manager of
the venue. The
crucial point for the determination of failure and application of a collection
of tax under the said provision is “time and manner of payment of
collection” which is missing unlike other similar provisions such
as sections 234, 236C, 236F, 236G, etc. Therefore, the said section is
ineffective till such time, the time and manner of payment of collection of tax
are not provided either by amending the said section or issuing the
notification by the Federal Government in terms of section 240 of the
Ordinance. It is pertinent to mention here that for the purposes of removing
the difficulties in giving effect to any of the provisions of the Ordinance,
the Federal Government has vested with the only power to issue a notification
in the Official Gazette under section 240 of the Ordinance. For convenience,
the provisions of section 240 of the Income Tax Ordinance, 2001 are reproduced
hereunder: -
“240. Removal of difficulties: - (1) Subject to sub-section (2), if any difficulty arises in giving
effect to any of the provisions of this Ordinance, the Federal Government may,
by notification in the Official Gazette, make such order, not inconsistent with
the provisions of this Ordinance, as may appear to it to be necessary for the
purpose of removing the difficulty.
(2) Omitted vide
Finance Act, 2010.”
However,
instead of the Federal Government, the Federal Board of Revenue has issued the
Circular No.10 dated 17-09-2013 for the purposes of removing the difficulties
and in giving effect to the provisions of section 236D of the Ordinance wherein
inter alia the time and manner of payment of collection of tax has been
prescribed. Therefore, the said Circular is inconsistent with the provisions of
section 240 ibid and thus, cannot be considered and relied upon. It is settled
law that rules/notification being a subordinate legislation is subservient to
the parent statute and issuance of any instrument/notification under delegated
authority is aimed to fulfill and advance the aim of the parent statute and
cannot nullify the express provision of the Act. Reliance may be placed on law laid down by Apex Court of Pakistan in Mian
Zainuddin v. Punjab Local Government, (1985 SCMR 365), Pakistan
through Secretary Finance v. Aryan Petrochemical Industries (Pvt.) Limited,
(2003 SCMR 370), National Electric Power Regulatory Authority v, Faisalabad Electric
Supply Company Limited (2016 SCMR 550) and Sadiq Hussain Majid v.
Secretary Government of Pakistan, (2007 PTD 2188). Notwithstanding the aforesaid, through the
aforesaid Circular the following clarification is being given which is
reproduced hereunder: -
|
Sr No. |
Queries |
Clarification |
|
2 |
At what time the tax should be withheld? i)
At the time of final payment Or ii)
At each stage of payment. |
As tax is to be collected on the total amount
of bill, tax is to be withheld at
the time of issuance of bill on the day the function is held.
(Emphasis supplied) |
The
above clarification of the FBR is also inconsistent with the provision of
section 236D of the Ordinance. As per the said section, the tax is to be
collected and not withheld at the time of issuance of the bill. There is a
marked distinction between the expression “tax collection and tax deduction”.
The words “deduct”
and “collect” cater to two different
situations under the Ordinance. The Hon’ble Supreme Court of Pakistan in the
case titled as Pakistan Television Corporation Ltd Vs Commissioner Inland Revenue,
LTU, Islamabad, etc, (2017 PTD 1372) has dilated upon the
distinction between the two words and held that: -
“6………………..From the above, it is clear that the words ‘deduct’ and
‘collect’ cater to two different situations. A perusal of the various
provisions of the Ordinance in which the words ‘deduct’ or ‘collect’ (or both)
are used indicates that the former is used where payment is being made by a
person and he is required to take away or subtract a percentage of such payment
as advance tax to be deposited with the treasury, whereas the latter is
employed where the person receiving the payment is to deposit advance tax on
behalf of the person making the payment……..”
In
section 236D the word collect has been used therefore, the prescribed person is
required to collect the advance tax while receiving the payment from the
recipient of service. Contrary to this, the FBR has used the word “withheld” in
its Circular which is synonymous with the word “deduct” and as such the
clarification of the FBR is also contrary to the provision of section 236D
ibid.
It is an established and settled principle, evolved through series
of judgments by the higher judicial forums of the country, that there is no
room for any intendment and there is no presumption as to tax/duty and tax can
only be charged on a clear verdict of the fiscal statutes. Reliance is placed
on the judgments reported as Commissioner Inland Revenue (Legal),
Islamabad Vs M/s Wi-Tribe Pakistan Limited, Islamabad, (2020 SCMR
420). Moreover, under Article 77 of the
Constitution of the Islamic Republic of Pakistan, 1973 no tax shall be levied
except by or under the authority of law. Hence in the light of foregoing
discussion and from the pronouncements of the honorable Courts, unless and
until the deficiencies are not removed by the competent authority, it is held
that since in the provision of section 236D ibid, the time and manner of
collection of advance tax is missing unlike other provisions such as sections
234, 236C, 236F, 236G, etc. of the Ordinance, therefore, the appellant cannot
be declared as a taxpayer in default under the provisions of section 161 of the
Ordinance.
5. For what has
been discussed above, the appeal of the appellant is accepted and the orders
passed by the lower authorities are annulled.
|
|
Sd/- (M. M.
AKRAM) JUDICIAL
MEMBER |
|
Sd/- (IMTIAZ
AHMED) ACCOUNTANT
MEMBER |
|
No comments:
Post a Comment